Automakers enjoyed a resurgence in sales in 2023, but 2024 might be a different story.
With major car companies due to report year-end sales figures this week, analysts are forecasting sales of new cars for the U.S. could reach nearly 15.5 million for 2023, a roughly 13% increase from 2022, The Wall Street Journal (WSJ) reported Wednesday (Jan. 3).
Car sales fell to their lowest level in more than a decade in 2022 due to supply chain and manufacturing snags, as well as inventory issues, but then recovered in 2023, with sales up by double digits in the first nine months of the year.
“We’re finally getting back to the traditional buyer’s market,” said Cole Potamkin, chief operating officer for dealership chain Potamkin, per the report.
Instead of relying on built-up demand, dealerships will need to begin trying to entice buyers once more, he added.
Car companies, meanwhile, saw their profits rise as consumers shelled out more as car supplies dropped, according to the report. Now, consumers are more hesitant, with some auto executives predicting a further drop in the price of new vehicles.
Cox Automotive has forecast 15.6 million vehicle sales, mostly driven by an increase in fleet or commercial sales, while retail sales are expected to remain mostly flat. Jonathan Smoke, chief economist at Cox Automotive, suggested that sales growth this year will be constrained and weak.
Meanwhile, last month also brought the news that an increasing number of consumers owe more on their car loans than their vehicles are worth.
It’s a situation known as negative equity, and consumers in November were “underwater” on their loans by an average of $6,054, the most since April 2020. It’s not a good place for consumers to be in, as a wave of car purchases was followed by higher interest rates that was followed by an uptick in repossessions.
“We’re in this situation where, combined with the cost of the vehicles being so high and the interest rates being so historically high, you have a lot of people who are in bad car loans,” Joseph Yoon, consumer insights analyst for Edmunds, said in December.
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